Obtaining a mortgage, especially if you are a first-time buyer, can entail quite a bit of paperwork and legal review. Before you buy a home, it is important that you review all the loan products that are available by a lending bank. The first step entails pre-approval. However, this step of the process does not indicate what you actually can afford. It merely gives a lender and a broker the information they need to size up the kind of neighborhoods and homes that are more likely to meet with in your budgetary criteria and needs.
By the time you find that dream piece of real estate, you should be ready to apply for financing. Loans come in a number of forms, including adjustable rate and fixed rate mortgages, construction loans, and loans designed for low and moderate salaries.
Adjustable Rate Mortgages (AMR)
As it sounds, this type of loan offers the home buyer with a good deal of flexibility. Designed for the homeowner who wants to save money during the early part of a lending term, the financing enables a buyer to qualify for a larger funding amount if he wants to purchase a higher-priced home at a later date.
ARMs are defined as fixed-rate terms for periods of 3, 5, or 6 years. After that time, the interest adjusts, contingent on market conditions. Caps are featured on the ARM to place a stop on varying rates during the adjustment period for the loan.
Fixed Rate Financing
Fixed rate financing, as it sounds, offers home purchasers with a fixed rate of interest and monthly principal- each of which never alters during a loan’s life. This kind of loan can protect the homebuyer from escalating rates. Customers can select from terms of 10, 15, 20, or 30 years.
Construction or permanent financing is used when a real estate buyer is building a new property but wants to set up financing in one simple step. Buyers like this type of real estate loan as it only entails one application, one process for approval, and a single closing. Using this financing approach also reduces closing costs. Consumers can choose an ARM or fixed-rate when they apply for this type of financing.
Buyers with Moderate or Low Incomes
Buyers of homes with moderate or low incomes can also take advantage of programs with no points and reduced interest rates. Some interest rates are lowered by as much as.25% when using this method of financing. Buyers can refinance a current loan or buy a home for 20% down with no application fee.
As you can see from the above information, home loans that offer a variety of options and possibilities can be secured. Flexible terms make it convenient to negotiate a home loan today. The best way to begin the process is to set up a consultation with a buyer’s agent at a local real estate firm. Look online as well, and contrast the rates for varying mortgage home loan packages.